Explanation

This risk was not identified. The audited financial statements for CruiseOne, Inc. (CruiseOne) show it to be a profitable company with significant positive and growing shareholder equity. An accountant's review of these statements is still important for a full understanding of the franchisor's financial position, including its assets, liabilities, and revenue sources. A strong franchisor is better positioned to provide support and grow the brand.

Potential Mitigations

• A franchise-experienced accountant should review the franchisor's audited financial statements, including all footnotes and the auditor's opinion.
• It is wise to discuss the franchisor's financial health and its implications for long-term support with your business advisor.
• Your attorney can confirm that the financial statements comply with all federal and state disclosure requirements.

Explanation

This risk was not identified. Item 20 shows consistent and strong net growth in the number of franchised outlets over the past three years. This growth is supported by the franchisor's strong financial performance as shown in Item 21. While rapid growth can sometimes strain a franchisor's support systems, the financial stability here suggests they may have the resources to manage it. Verifying support quality with existing franchisees is still crucial.

Potential Mitigations

• Speaking with a range of new and established franchisees can provide insight into the quality of the franchisor's support systems during this growth phase.
• A business advisor can help you assess if the franchisor's support infrastructure, as described in Item 11, is adequate for the number of units.
• Your accountant should confirm the franchisor's financial statements show investment in support infrastructure commensurate with its growth.

Explanation

This risk was not identified. CruiseOne has been offering franchises since 1992, and its key executives, as listed in Item 2, have extensive experience in the travel industry and with the company. The system is well-established with over 2,000 units. While all investments carry risk, this is not an unproven or new franchise system.

Potential Mitigations

• Your business advisor can help you evaluate the management team's experience as detailed in Item 2.
• It is still beneficial to speak with long-term franchisees to understand how the system has evolved and been managed over time.
• An attorney can review the franchisor's history in Item 1 for any potential concerns related to predecessors or affiliates.

Explanation

The travel industry is subject to economic cycles, global events, and changing consumer preferences. However, cruise and vacation travel is a mature and established industry, not typically considered a short-term fad. The business model's long-term viability depends on the broader travel market's health and the franchisor's ability to adapt. A business advisor can help you assess these long-term market risks.

Potential Mitigations

• A discussion with your business advisor can help you assess the long-term market trends for the travel and cruise industry.
• Researching industry reports and news can provide a broader perspective on the sustainability of this business model.
• It may be helpful to ask existing franchisees about how their business has performed through various economic cycles.

Explanation

This risk was not identified. The franchisor, CruiseOne, has been in business and franchising since 1992. Item 2 details the backgrounds of the executive team, showing that most key personnel have many years of experience with the company and within the travel industry. This suggests a stable and experienced leadership team is in place.

Potential Mitigations

• A review of the executive backgrounds in Item 2 with your business advisor can confirm their depth of experience in franchising and the travel industry.
• It can be valuable to ask franchisees about their direct experiences with the management team's competence and support.
• Your attorney can help verify the information presented and check for any undisclosed concerns related to management.

Explanation

This risk was not identified. Item 1 discloses the parent company is World Travel Holdings, Inc. (WTH), but there is no indication that WTH is a private equity firm. The FDD suggests a stable, long-term ownership structure focused on the travel industry. A prospective franchisee should still understand the nature of the parent company and its influence on the franchise system.

Potential Mitigations

• Your business advisor can assist you in researching the parent company, World Travel Holdings, Inc., to understand its business model and history.
• It is prudent to ask long-term franchisees if they have observed any significant changes in franchisor philosophy or support over the years.
• Consulting with your attorney can clarify the relationship between the franchisor and its parent company as outlined in Item 1.

Explanation

This risk was not identified. Item 1 clearly discloses that the parent company is World Travel Holdings, Inc. The franchisor, CruiseOne, is a wholly-owned subsidiary. Because CruiseOne itself is financially strong and presents its own audited financial statements in Item 21, the financials of the parent company are not required for disclosure and their absence does not appear to obscure any significant risk.

Potential Mitigations

• Your attorney can confirm that the disclosures regarding the parent company in Item 1 meet all legal requirements.
• An accountant's review of the franchisor's financials in Item 21 will help verify its standalone financial viability.
• It may be useful to ask the franchisor about the nature of the financial relationship and support from its parent company.

Explanation

This risk was not identified. Item 1 of the FDD states that CruiseOne does not have a predecessor. This means the company did not acquire its assets from a prior entity that operated a similar franchise system, which simplifies the due diligence process as there is no hidden history to investigate from a predecessor company.

Potential Mitigations

• Your attorney can confirm the franchisor's statement regarding the absence of a predecessor in Item 1.
• A business advisor can help you focus your due diligence on the existing company's history since its inception in 1992.
• Speaking with long-term franchisees will still provide valuable insight into the company's history and evolution.

Explanation

This risk was not identified in the FDD. Item 3 states, "No litigation is required to be disclosed in this Item." This is a positive indicator, suggesting the absence of significant legal disputes with franchisees, government agencies, or other parties that would meet the criteria for disclosure. This may reflect a healthy relationship between the franchisor and its franchisees.

Potential Mitigations

• An attorney can help you understand the specific legal criteria for litigation disclosure in Item 3.
• It is still prudent to ask current and former franchisees about their experiences with disputes, even those not rising to the level of litigation.
• A business advisor can guide you in performing online searches for any news or informal complaints related to the franchisor.